St. Jude’s Durata Linked to Case of Externalized Wire

June 12 (Bloomberg) -- St. Jude Medical Inc.’s Durata, a
wire used to connect life-saving defibrillators to the heart,
was linked to a rare and dangerous defect in one patient in a
report to U.S. regulators.

A doctor voluntarily reported the case of a so-called
externalized wire from April 17 to the Food and Drug
Administration, according to a posting on the agency’s Maude
safety database. The unidentified doctor didn’t tell St. Paul,
Minnesota-based St. Jude, according to the FDA’s posting. The
company couldn’t immediately confirm the report.

St. Jude stopped selling its Riata wires, known as leads,
in December 2010 and recalled them a year later amid reports
they could break through the insulation coating and fail to work
properly. Durata replaced Riata, and the new product’s
insulation coating, called Optim, was designed to prevent the
rare defect. No cases of externalized Durata wires have been
reported before now.

“All leads are prone to some level of failure and one lead
failure does not implicate the entire family of Durata leads,”
wrote Raj Denhoy, a Jefferies & Co. analyst in New York, in a
note today to investors. “This new report raises questions on
whether Durata is truly immune to the same failures that plague
Riata and at the very least, will keep up the discussion on
whether St. Jude’s smaller diameter leads should be used when
other more reliable leads are available.”

Share Decline

St. Jude fell 6 percent to $36.24 at 4:05 p.m. in New York,
the biggest drop since December. The shares have dropped 26
percent in the past 12 months.

“The report indicates that it was filed by a physician,
but does not provide the device serial number, the name of the
physician or the institution, which would enable us to learn
more about the circumstances,” Amy Jo Meyer, a spokeswoman for
St. Jude, said in an e-mail. “We will make every effort to
learn more about this report as quickly as possible.”

There haven’t been any cases of externalized wires on a
Durata lead reported to the company, Meyer said.

St. Jude’s declining stock price is an overreaction, David
Roman, an analyst at Goldman Sachs in New York, wrote today in a
note to investors. Durata’s performance seems to be similar to
competitors and its future performance may show a reduction in
lead failures, he said.

“The sharp negative reaction in the stock reflects the
fear factor of a product recall that we ultimately do not think
will materialize,” Roman said. “We see this as an especially
compelling opportunity” to buy, he said.